Elections in India come at critical time amid tensions with Pak: DBS Group

Press Trust of India  |  Singapore 

India's come at a critical juncture for its economy amid tensions with Pakistan, a top has said.

In a report on India's economy, the said that despite some reforms, a welcome improvement in the business climate and a discernible decline in governance lapses, growth has been lacklustre.

The savings-investment gap remains large, external vulnerabilities loom against an improved but still modest buffer to absorb shocks, and financial sector stress remains high, according to a Research team.

continues to govern with strength and has considerable popularity, but a recent spate of state election setbacks and some fledgling governance scandals have dented the aura of inevitability from the elections, said the report.

"A spike in political tensions vis-a-vis is another complicating factor," said Chief and at the Research.

Resumption in border tensions comes at a tricky time for both the as heads into in April-May, while Pakistan's economy is on a weak footing, it said.

The team, analysing the impact of the elections on the economy, said that growth, on an average, slows a quarter before the elections but rises subsequently.

Inflation tends to pick up post elections. However, price dynamics are quite benign this time, easing concern on this issue, it said, adding equities rise prior to the election but pull back thereafter.

It said that apart from earnings and valuation, the global environment is also a big influence on these trends.

The rupee tends to appreciate before elections, extending the rally for a quarter after, before turning stable-to-weaker, the research team said.

The general elections, slated for April/May, is a herculean undertaking, wrote Baig and Rao in the report.

Over 800 million people will cast their votes across 29 states and seven union territories, electing 543 members, with the majority party or alliance forming a government to lead the world's largest democracy for the next five years, the report added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, March 01 2019. 17:30 IST